What Is Hypothesis Testion?

Hypothesis testing is an act in statistics whereby an analyst tests an assumption regarding a population parameter. The methodology employed by the analyst depends on the nature of the data used and the reason for the analysis.

In hypothesis testing, an analyst tests a statistical sample, with the goal of providing evidence on the plausibility of the null hypothesis.

Statistical analysts test a hypothesis by measuring and examining a random sample of the population being analyzed. All analysts use a random population sample to test two different hypotheses: the null hypothesis and the alternative hypothesis.

The null hypothesis is usually a hypothesis of equality between population parameters e.g., a null hypothesis may state that the population mean return is equal to zero. The alternative hypothesis is effectively the opposite of a null hypothesis (e.g., the population mean return is not equal to zero). Thus, they are mutually exclusive, and only one can be true. However, one of the two hypotheses will always be true.